Public Policy

July 10, 2019

Impact Investing: the future of philanthropy


We’re all aware that there has been a trend going back many years now for successful businesses and individuals to want to give something back, and be seen to give something back, to the communities that incubated them. Corporate Social Responsibility, for genuine or occasionally cynical reasons, has been pushed to the fore for companies; high net worth individuals have been encouraged by Warren Buffett, Bill Gates and others to give away large portions of their wealth; and increasing numbers of businesses and wealthy families have set up trusts and foundations in their names to donate to charity.

Less obviously, the experience of all this giving has in the past few years started to change the nature of philanthropy across the globe. In the old days, donors simply looked for charities that aligned with their values and handed them over a large cheque – purely transactional. If they were particularly interested, they might ask for a report in a year or two to find out where the donation had been allocated. But professionals who brought rather tighter management discipline to all other aspects of their lives began to feel that this laissez fair approach wasn’t giving them the bang for their buck they had wanted. They started to involve themselves in the ways in which the charities went about their work. This role is known in the jargon as a “funder-plus”, where donors began to tie strings to money offered: expecting certain standards of behaviour, for instance better quality corporate governance structures, accounting procedures or staff training. Some requested media coverage for this work, or demonstrable changes in public attitudes or government policy as a result of their funding, which presented communications agencies with business opportunities.

However, in recent years approaches to giving have evolved again. After all, why should professionals who have busy day-jobs concern themselves with the internal processes by which charities do their work? (And there is now a cottage industry of consultancies out there teaching charities how to be more effective with their incoming donations.) It was deemed more productive to give the funding and specify very clearly what the outcome is expected to be. But if you want to reduce homelessness in a certain neighbourhood of Manchester, or reduce child abuse in rural Thailand, are you best placed to know how it should be done? This is known as outcome funding or impact investing and it’s the cutting edge of global philanthropical thinking right now. If the targets aren’t met, the money gets withdrawn and given to someone else who can do the job better. This work is exploding – UBS estimates there is about US$3 trillion of funding available for it – and Instinctif is leading the way on the comms.

Last week, at the seventh annual Asian Venture Philanthropy Network event in Singapore, more than a thousand funders and delivery partners gathered to swap ideas and exchange experiences, with many looking for ways to promote their projects to other funders, to engage governments, or to get credit for the innovative activities of the charities on the ground.

The focus of outcome funding is particularly on Asia because we have both the social problems that require external help to solve, but unlike in some places we also have many entrepreneurial governments not wary of foreign organisations with complex financial instruments willing to invest in impact. In fact, this week Instinctif is launching the first-year results of just such a project, the world’s largest education Development Impact Bond. This is a coalition including the Prince of Wales’ British Asian Trust, UBS Optimus and the Michael and Susan Dell Foundation, which aims to improve education standards among children in parts of India. We are very proud to be managing a business with a social dimension.

Simon Buckby is Managing Partner within Instinctif’s Public Policy practice. He joined the team in 2017 when Champollion, the consultancy he founded, was acquired by Instinctif. Champollion was a market leader in this space, and the team continues to work with numerous trusts, foundations and charities. Simon is currently based in Hong Kong.